1 Filed 6/ 3 /21 CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FIRST APPELLATE DISTRICT

DIVISION TWO

GATEWAY BANK, F.S.B., Plaintiff and Respondent,

v. POPPI METAXAS, Defendant and Appellant. A158793
(San Mateo County Super. Ct. No. CIV 534510)

Appellant Poppi Metaxas was the p resident and c hief e xecutive o fficer of Gateway Bank (Gateway or the b ank) in 2008 when the subprime mortgage market collapsed, leading to the financial crisis. Following their
examination of Gateway , federal regulators categorized it as a “ troubled
institution , ” and i n response the b ank set out to raise more capital and de al
with its troubled assets. Certain transactions caused the regulators to be suspicious, leading to a lengthy investigation. A long the way, the United States Attorney also became involv ed, causing another investigation , which
culminat ed in Metaxas being indicted

— and in 2015 to her pleading guilty to conspiracy to commit bank fraud. S hortly there after , the b ank sued Metaxas based on two transactions
in volving Ideal Mortgage B r okers : (1) a March 2009 $3.65 million working capital loan ; and (2) a November 2009 $757,000 wire transfer . Following a lengthy trial, the court

- appointed referee found for the b ank, awarding it $250,000 in tort of another damages arising from “the fallout” from the first2

transaction, and $132,000 in damages for the second. Metaxas appeals, asserting two arguments: (1) the tort of another damages must be reversed
because the first transaction resulted in “substantial benefit ” (Rest.2d Torts, § 920) to Gateway , and (2) the award for the second transac tion was error because Metaxas had no alternative but to approve the wire transfer . We reject both arguments and affirm. BACKGROUND The Parties and the General Setting Plaintiff and respondent Gateway is a community bank headquartered in Oakland. Defenda nt and appellant Poppi Metaxas joined Gateway in 1993 as a compliance officer. She was quickly promoted , to the dual position of c hief

c ompliance o fficer and c hief l ending o fficer , and promoted again in 199 6 , to

p resident and c hief e xecutive o fficer (CEO). Sh e also became a member of the
Board of d irectors. In 2008, the subprime mortgage market collapsed, and widespread defaults caused a chain reaction leading to a global financial crisis. It was a challenging time in the banking industry , and regu lators pressured banks to improve their balance sheets. Gateway was no exception , and it became the subject of federal oversight. The federal regulatory body overseeing Gateway was the Office of Thrift Supervision (OTS), an agency of the Department of Tre asury. Following its examination , in late 2008 the OTS advised Gateway officials
that the b ank’s financial condition had to be improved , a nd in February 2009, the OTS issued its formal conclusions and rating, categorizing the bank as a “troubled instituti on. ”3

In response, the b ank’s Board embarked on a campaign to raise more capital and shed many of its “troubled assets,” which consisted of real property Gateway had acquired through foreclosure (known as r eal e state

o wned or “REOs”) and non performing loa ns (“NPLs”) in various stages of default. What the b ank

— and Metaxas

— did in connection with the effort became the subject of a lengthy investigation , as set forth in detail below. Suffice to say here that the investigation led to the OTS demanding in early 2010 that Gateway fire Metaxas , who i n fact left the bank in May

. T he OTS investigation continued

. Then, i n 2011, a New York Federal Grand Jury issued a subpoena to Gateway requiring documents and testimony , which result ed in an additional investigation , one that lasted several years

. This investigation led to a March 2014 indictment charging Metaxas with three crimes: (1) conspiracy

to com mit bank fraud; (2) bank fraud; and (3) perjury, lying under oath to the OTS. And i n 2015, Metaxas pled guilty to the conspiracy charge, and was sentenced to 18 months in prison. This lawsuit followed. The Proceedings Below Gateway’s Lawsuit In July 2015, Gateway filed a complaint against Metaxas. It alleged eight causes of action, for fraud, breach of fiduciary duty, and negligence
based on the two transactions with Ideal Mortgage Brokers

. In September , Metaxas filed an answer and in Novembe r , a cross
complaint , which she would come to dismiss in February 2016. At a November 2015 case management conference , the case was set for jury trial for September 2016. Due to various motions , and stipulations , and
numerous contested and uncontested ma tters held before several different4

judicial officers , trial was continued several times, ultimately to be heard a s a court trial in March 2019

. The parties wanted the trial to be before the Honorable Robert Baines, a retired superior court judge

. A nd i n October 2018, the superior court filed

an order pursuant to Code of Civil Procedure section 638 appointing retired Judge Baines to serve as referee, to hear and determine all issues of fact and law and to report a statement of decision. As the referee w ould later put it,

at the parties ’ request he was to decide five causes of action, three involving
the w orking capital loan (the first, for fraud; the second, for concealment; and the fourth, for breach of fiduciary duty ) , and two involving the wire transf er (the fifth, for breach of fiduciary duty; and the sixth, for negligence )

. 1 The Trial and the Statement of Decision Trial began on March 11, 2019, and took place over eight days, with the referee hearing from eight witnesses, five on behalf of Gateway and three on behalf of Metaxas. The five Gateway witnesses were Metaxas ; James Keefe, a former Gateway director; Timothy Green, former Gateway c hief f inancial

o fficer (CFO) ; Grant Stifel, an expert on legal fees ; and Brian Kelley, an expert on banking. T he three Metaxas witnesses were herself ; Joseph Anastasi , an expert on accounting; and James Wagstaffe, an expert on legal fees. The parties introduced 202 exhibits. Following trial, the parties entered into a “ Stipulation and Order Modifying the Order Appointing Referee ” to address various posttrial procedures, including the schedule for submitting posttrial briefs and the timing and procedure for rendering the statement of decision. And t he parties requested a statement of decision on whether Me taxas was liable to Gateway on its various causes of action; the amount of damages; whether

1 In October 2017, Gateway had dismissed some causes of action.5

Gateway’s claims were barred by various affirmative defenses; and whether Metaxas was liable to Gateway for attorney fees and costs. 2 On May 17, both sides filed lengthy posttrial briefs , to which each side filed repl ies

. On July 3 , the referee served his proposed statement of decision , indicating hi s intent to rule for Gateway and to award tort of another damages for its legal costs in defending itself and its Bo ard members, and damages in connection with the wire transfer

. The last day to file objections to the p roposed s tatement of d ecision was July 17. No objections were filed by Metaxas. However, on July 29, Metaxas filed a nine

- pa g e brief constituting her objections to the p roposed s tatement , argu ing that California’s “ s pecial b enefit ” d octrine required the referee to offset Gateway’s purported gains against its tort of another losses

. Gateway agreed to allow the referee to consider Metaxas’s belated objections. On August 5, the referee filed an amended statement of decision, a comprehensive 28

- page decision , whose substance begins with eight pages of “facts” pertinent to the two transa ctions in issue. Metaxas spends many pages in her brief focusing on her lengthy experience at the bank, and various
claimed successes

. A nd a s to the referee’s facts , Metaxas’s brief asserts there were “conflicts” or “ competing ” evidence

. She also accuses an expert witness for the b ank of “guessing” and “surmise.” Th is , of course, is improper, as it disregards a fundamental rule of appellate review , t hat we view the facts

2 The parties also : wa ived the issuance of a tentative decision under California Rules of Court (CRC) , rule 3.1590(a)

– (c) ; were deemed to have requested a proposed statement of decision and judgment under CRC 3.1590(d)

– (f

) ; and agreed to follow the procedures set forth in CRC 3.1590(g) and ( h) regarding objections to the proposed statement of decision and judgment.6

favorably to the judgment ( David v. Hernandez (2014) 226 Cal.App.4th 578,
58 1 ) , under the principle requiring us to presume the lower court’s judgment is correct, and draw ing all inferences and presumptions necessary to support
it . ( Chapala Management Corp. v. Stanton (2010) 186 Cal.App.4th 1532, 1535, citing In re Marriage of Arce neaux (1990) 51 Cal.3d 1130, 1133.) Thus, and because we can hardly improve on the referee’s excellent exposition of the facts, we quote liberally from his statement of decision (deleting all citations) , adding our embellishments where appropriate

. And

we begin with the facts after the OTS rated Gateway as a “troubled institution”: “The Gateway Board and Metaxas knew the OTS rating and the proposed cease and desist order could spell disaster for the bank. As the Board noted at its February 26, 2009 meeting, ‘[t]he Capital infusion, accompanied by a meaningful reduction of the Bank ’s NPAs will also result in the removal of th e troubled designation, something the management and the Board consider key and critical to the institution’s soundness and success.’ The Board set a deadline, March 31, 2009, to turn matters around. “To raise capital , the Board authorized the issuance of a round of preferred shares. All Board members and bank executives were encouraged to find buyers, including themselves. The Board also requested that all attempt to find buyers for the troubled assets. “For a number of years, Gateway had enjoyed a very close working relationship with Ideal Mortgage Bankers, Ltd., of New York, d/b/a Lend America ( ‘ Ideal ’ ). Gateway was the warehouse lender for Ideal’s mortgage loans; it had g ranted Ideal a $100,000,000 warehouse loan ‘ facility ’ or line of credit. Gatewa y was also the main purchaser of the loans made by Ideal. In essence, Gateway provided the funds for Ideal’s mortgages, then bought those7

mortgages and resold them on the secondary market to ‘ takeout lenders, ’ making a profit at each stage. Ideal was Gat eway’s largest and most profitable customer. “Upon receiving the February 5, 2009 downgrading from OTS, the Board instructed Metaxas to approach Ideal for possible assistance. Accordingly, Metaxas and Michael Kenny, Gateway’s Senior Vice President ( ‘ Kenny ’ ) flew to New York on February 12, 2009. They met with Michael Ashley, who held various titles at Ideal, including those of Executive Vice President and Chief Business Strategist [fn.] ( ‘ Ashley ’ ) and Helene DeCecillis, Ideal’s Chief Operating Officer

. ” T he footnote stated that “Ashley’s various titles at Ideal were not entirely clear. Ashley had previously been convicted of wire fraud in the mortgage business and, as a result, was precluded from holding certain positions at financial institutions.”

“Idea l obviously had a vested interest in the survival of its warehouse lender, and was more than willing to assist. Ideal offered to help locate buyers for Gateway’s troubled assets, [fn.] and for its preferred shares. Immediately following the February 12 meeting, Metaxas happily reported these developments to Board members. ” The footnote s tated that “The assets in question were 25 REOs with a ‘book value’ of $7,993,368 and 27 NPLs with a ‘book value’ of $7,278,180.”

“ Ashley found buyers for $6.9 million o f shares, and suggested possible purchasers for Gateway’s troubled assets. In addition, he put together his own group of asset buyers, comprised of three New York companies: Cooper Capital Group, Ltd. ( ‘ Cooper ’ ), Empower International, Inc. ( ‘ Empower ’ ), and the Steve Menna Group ( ‘ Menna ’ ). These three entities were closely tied to Ashley; Ashley owned Cooper, his father owned Empower, and the owner o f Menna Group was affiliated with Ashley. ” In March 2009, Metaxas learned8

that Ashley, owner of Cooper, a long with his father Kenneth, owner of Empower, had been convicted of federal wire fraud in connection with illegal mortgage activity. The credit memoranda failed to mention those
convictions , and Metaxas did not inform the Board of th e se facts. 3 “By M arch 11, less than 30 days after the New York meeting, Metaxas announced to the OTS that Gateway ha d an asset sale in place. She eagerly reported that, although ‘not fully consummated yet,’ ‘we have now secured agreement’ and she expected to complete the logistics of the sale the following week (‘the purchasers of these assets are expected in our offices Tuesday

— Wednesday of next week’) , a nd she expected to close the sale by March 25th, the day before the next Board meeting. Metaxas also reported to the O TS that the purchase price represented over 95 percent of book value of the troubled assets. It was clear from our evidence that Metaxas was referring to the three buyers assembled by Ashley.

“ Although Metaxas had announced on March 11th that an asset sal e was close at hand , it appeared that this deal may have been somewhat of a ‘fallback’ deal, to be used in the event other buyers could not be found. Indeed, Gateway continued to look for other possible buyers. One potential buyer was Waterfall Capital ( ‘Waterfall’) . On March 17th, Waterfall made a $ 5,000,000 offer for the troubled assets. Gateway declined the offer, as the
Bank had determined its bottom line was $8,000,000. When Ashley was informed that Waterfall’s purchase would not occur, he indicated that ‘It’s my
headache ,’ and that he would still be meeting with other potential buyers

. Not long afterwards, the initial thr ee buyers (Cooper, Empower, and Menna)

3 At trial, Metaxas tried to justify the nondisclosure by claiming it “was not a matter that would have any bearing on the Board ’s decision approving or declining the loan.”9

travelled to Gateway Bank in California to finalize the deal. Metaxas testified that the meeting took place and that despite her March 11th communication to the OTS regarding the meeting, the OTS did not send a

repre sentative to that meeting. “The deal with the three buyers was that each would purchase a share of the 25 REO properties and each would purchase some of the 27 NPLs, for a combined purchase pri c e of $15,271,548. Under the terms of th at sale, the three buy ers would each make a twenty

- five percent down payment (for a
total down of $3,817,887) and each would then borrow the balance of the purchase money (totaling approximately $11.2 million) from Gateway under a ‘loan to facilitate.’ To secure these loans, G ateway was to retain a security interest in the transferred assets. “The deal with the three buyers was soon finalized and then scheduled for consideration by Gateway’s Executive Loan Committee (‘ELC’) and its full Board on March 26. If approved, the sale s were to close by March 31. “Also on the agenda for March 26 , at both the EL C and Board meetings, was approval of a large ($3.65 million ) ‘working capital’ loan to Ideal. According to Metaxas, Ideal had requested this loan earlier in 2009,
and it had bee n discussed at the February 12 th meeting in New York. “Metaxas helped present both matters to the ELC and the Board on March 26. When doing so, she did not tell the Board of any connection between the two agenda items, or that Ideal had procured these thr ee buyers. She testified that on March 26, she was aware that Ideal owed money to C ooper, and suspected that some of the working capital loan might be used to pay down that debt; however, she did not share her suspicion with the E LC
or her Board.10

“The ELC and the Board were quite excited about the asset sale. One Board member remarked, rather prophetically, that it was ‘too good to be true.’ After all, the Bank was selling its troubled assets for nearly twice the amount of its $8 million bottom line, and was receiving a substantial (twenty

- five percent) down payment, with the assets remaining pledged as security for the loans.

“ Although the Gateway Board was advised that the three buyers were
not well

- funded and thus would need to borrow their down paymen ts, the
Board found the sale very attractive, and approved it. When discussing how the buyers might obtain their down payment loans, Board member Baxter apparently quipped that he didn’t care where they got their down payment as long as it was from a lawf ul source (i.e., ‘ not from drug dealers or Al

- Queda ’ ). There was no discussion that the down payments might actually be coming from Gateway, via the working capital loan to Ideal. “At those same meetings, the ELC and the Board approved the ‘w orking c apital ’ l oan to Ideal for $3.65 million. The Board was unaware of any connection between the two transactions. “Soon after obtaining the Board’s approval, Metaxas happily reported to the OTS on this sale of the troubled assets, hoping to start the process for receiving a better rating and avoiding the proposed cease and desist order. “However, he r hopes were soon dashed; less than a week later, the OTS made an inquiry about the March 26 transactions, asking for more details. The OTS clearly was concerned about this deal in which buyers had paid nearly full book value for troubled assets. The OTS asked about any possible connections between Gateway and the buyers or entities affiliated with the buyers. It also asked for the documentation on the loan to Id eal. Metaxas responded that there were no relevant connections between Gateway and the11

asset buyers or their affiliates. She did not reveal that Ashley of Ideal had procured the three buyers and that he was closely involved with the three buyers. ” On Ma rch 30, Ideal withdrew from Gateway the full proceeds of the $3.6 million working capital loan , which was unusual , as most such l oan s are revolving lines of credit to be drawn down as funds are needed, not funded on the very first day. Ideal transferred t h e funds to Cooper, Empower, and
Menna , and the next day, the three of them made down payments equal to 25 percent of the purchase price of the toxic assets, i.e., $3.8 million. Thus, the proceeds from the working capital loan made what came to be called at trial a

“ round trip ” to Gateway , disguised as part of the down payments for the toxic

assets. On March 3 1 , Metaxas sent this email to the Board celebrating her accomplishment in organizing the transactions: “Dear Directors: Just a quick note to confirm that we manged [ sic ] to complete the three bulk sales of REOs and NPAs that we discussing [ sic ] at our last Board meeting. . . . With our capital fully raised and our NPAs reduced so significantly, now we all have good reason to be proud of our Ba nk and celebrate our blessings.” Metaxas’s celebration was short lived. George Li m , the OTS field examiner assigned to Gateway, questioned
the asset sale , and on April 6, asked Metaxas whether those sales were in any way connected to the w orking capital l oan

. Metaxas denied any
connection between the transactions , a nd on April 8, wrote to Lim’s boss that the sale prices were rea l, that there were no connections between Gateway and the asset buyers or their affiliates. This is how she put it: “Responding to Mr. Lim’s inquiry, I hereby wish to certify . . . there are no existing and/or proposed business or other relationships between the purchasers (including12

the respective companies’ owners and affiliated entities) and Gateway and its directors, senior of

ficers, and principal shareholders.” What Metaxas did not reveal was: that Ashley, whom she knew to be the owner of one of the buyers, Cooper, also ran Gateway’s largest customer and mortgage partner, Ideal ; that Ashley’s father Kenneth owned one of the buyers, Empower; that the owner of the third buyer, Menna, was closely affiliated with Ashley; and that Ashley had procured the three buyers at Gateway’s request. “At the same time the OTS was scrutinizing Gateway’s actions, other federal agencies were investigating Ideal’s lending practices. On October 20,
2009 , the United States Attorney’s office filed a civil suit against Ideal, alleging fraudulent loan origination practices and seeking to enjoin Ideal from making any further FH A

- insur ed loans. The suit alleged that Ideal had falsified loan applications to make borrowers appear eligible for FHA

- insured
loans. “When informed of the complaint against Ideal, Metaxas issued a strong directive to all Gateway employees that same day, October 20 , 2009

. It basically ordered Gateway to cease dealings with Ideal. 4 “The next day, October 21 st , Metaxas testified before the OTS regarding Gateway’s March 26 th transactions. S he testified , under oath , that the troubled asset sale was an ‘arms

- length’ transaction, that there was no connection between Gateway and the three buyers, and that she didn ’ t know the source of the buyers’ down payments. ” 5

4 Metaxas’s directive commanded her staff to “ Stop funding requests until proof has been provided that the matter with HUD and/or the U.S. A ttorney’s office is resolved satisfactorily.”

5 Metaxas’s testimony included this question and her answer:13

On November 27 , and over the objections of Gateway CFO Green , Metaxas personally directed Gat eway’s wire room to transfer $757,000 from Ideal’s account at Gateway to Ideal’s payroll account at another bank

— this,
at a time when Ideal was not only in litigation with the government for civil fraud , b ut also owed Gateway approximately $ 55 to $ 60 milli on. In short , Metaxas overruled the Gateway CFO and personally directed the $757,000 wire transfer to Ideal, a company on the verge of collapse

. A nd collapse it did , as on the next business day, November 30, the government revoked Ideal’s license to mak e mortgage loans

. Ideal shut down and went out of business. Thus, and in disregard of her own directive, Metaxas caused Gateway to buy a portfolio of mortgages from Ideal that, due to fraudulent practices at Ideal, included worthless mortgages, which cam e to be referred to at trial as “air loans.” On December 30, Metaxas sent an email to the Board that Ideal ha d
closed its business , that Gateway had been unable to perfect its security
interest in Ideal ’s Ginnie Mae mortgage servicing rights, and that the entire

w orking capital loan balance of $3.65 million would be written off no later than December 31. This, Metaxas claimed, was the amount of Gateway’s
loss.

“Q. The agreement to purchase the REO required 25 percent down payment. Do you know where that 25 percent source of funds for that 25 percent dow n payment from the Steve Menna Group came from? “A. No sir. One of the things that is demonstrated very clearly by looking at

— at each one of the underwritings, say, perhaps, for the Cooper Group, is that our underwriting was significantly more gratuitou s tha n it would have been for a regular loan, a regular commercial loan that we would have made in accordance with our

— our

— with our bank standards. So one of the things that we did not do is verify source of down payment.”14

On January 4, 2010, Gateway sen t Ideal a n otice of default accelerating
the w orking capital loan and demanding repayment of the unpaid balance. The loan was never repaid. Meanwhile, the OTS investigation continued , to Metaxas’s chagrin. On January 14, Metaxas sent a letter to OTS senior manageme nt complaining
about Lim

. The letter insist ed Lim be removed from the Gateway investigation, and be replaced with another examiner , in Metaxas’s words , “to resolve the painful and unnecessary difficulties caused by [his] behavior , ” and “to ensure the elim ination of poisonous interference that has now become intensely personal.” 6 In March 2010 , the OTS contacted Larry Wang, chairman of the Gateway Board , and directed him to call a meeting of the Board without Metaxas being present. A t this meeting the OTS provided evidence that Metaxas had engaged in fraudulent transactions with Ideal and demanded that she be removed from the bank. And i n May 2010 , Metaxas left the
Bank

. 7 “In 2010, it was determined that some of the loans purchased by Metaxas from Ide al on November 27, 2009, were bogus ‘air loans,’ i.e., Ideal had not paid off the original lender despite receiving the funds to do so.

6 Among other things, Metaxas ’s letter objected to Lim ’s questioning the veracity of the Board minutes from the March 2 0 , 2009 meeting ; to his inquiry into a loan “made to several entities to facilitate the sale of REO”; and to his concern “with the valuati on of the loans included in [the toxic asse t sale] and the subsequent selling price,” including his belief that “the assets were sold well above fair market value and therefore the transaction made no sense.”

7 Metaxas’s brief sa ys that the “Board permitt ed Metaxas to resign in the midst of her battle with cancer.”15

FNMA, which purchased these mortgages from Gateway, required Gateway to repurchase the bad loans; Gateway did in April 2010. “In February 2011, a federal criminal Grand Jury issued a subpoena to Gateway, requiring documents and testimony. The Grand Jury apparently was looking into a variety of alleged wrongdoings by Ideal, Gateway, and possibly others. At that stage, it was unclear exactly what wrongdoings were being investigated, and who were the targets of the investigation. The
Bank ’s response to this criminal investigation was to fully cooperate and attempt to convince the Grand Jury that Gateway may have been a vic tim of a crime, but was not a perpetrator. The investigation, and the subpoenas, continued for the next three years. “Ideal had been forced into bankruptcy in 2010. In late 2012, the bankruptcy Trustee commen c ed adversary proceedings against Gateway,

see king to recover $50 million because of Gateway’s alleged failure to honor funding commitments it had made to Ideal. After defending against the Trustee’s action for almost two years, Gateway settled for $225,000 in September of 2014.” Meanwhile, the Unit ed States Attorney for the Eastern District of New York began investigating Gateway as part of its ongoing investigation of
Ideal. I n connection with this investigation, Gateway received four g rand j ury subpoenas between 2011 and 2014, causing Gateway to hire criminal defense counsel to defend itself and respond to the subpoenas. Doing so, Gateway’s counsel reviewed some 12,000 emails for privilege and relevance; produced over 40,000 pages of documents and emails; interviewed over 25
b ank officers, direct ors, and employees; conducted an internal investigation of Gateway; and prepared 22 bank employees to be interviewed by prosecutors.16

The result of all this wa s that Gateway incurred millions of dollars in legal fees. In March 2014, Metaxas was indicted o n three counts: (1) conspiracy to
commit bank fraud in connection with the r ound t rip t ransaction ; (2) bank fraud in connection with this t ransaction ; and (3) perjury, lying under oath to the OTS when she claimed she did not know the source of the down payments for the toxic asset sale. In April 2015, Metaxas p led guilty to conspiracy to commit bank fraud. Doing so, she acknowledged under oath in ope n court that she intentionally
concealed from the Board the true facts about the r ound t rip t ransaction

. As Metaxas’s own brief describes it , “ [ h ] er plea included an admission that she
knew in advance that the working capital loan and the troubled asset s ale were connected but did not communicate that to the Gateway Board

. ” 8

8 The relevant colloquy, some of which was quoted by the referee, included this: “THE COURT: Ms. Metaxas, at this point I need you to tell me in your own words what you did that makes you guilty of Count One. . . . “THE DEFENDANT: From 1996 until approximately March of 2010 I was the president and CEO of Gateway Bank, a federally chartered savings bank in California. In 2009, I acted and agreed with other s to arrange certain transactions that would help make Gateway’s books look more acceptable to the regulators. One set of transactions included a loan to Gateway’s biggest custom er which in [ sic ] your Honor it was used to fund payments back to the bank in the form of down payments from three other entities that purchased certain assets that the regulators wanted off the bank’s books. “I knew that the customers used the money from the loan to fund the down payment to Gateway for the purchase of the assets. “Taken together, these transactions did not actually improve the condition of the bank, and I did not provide the complete information about these transactions to Gateway’s Board which ultimately had to approve them. [¶] . . . [¶]17

At her sentencing hearing , Metaxas also apologized for her failure to disclose the source of the down payment for the toxic assets , telling the court, “It was wrong of me not to share the information that I had with the Board , and for that I am truly very sorry,” “I know I will be haunted by this non

disclosure until the day I die,” and “I wonder how I will ever be able to forgive

my self.” And , she added, “I am determined to make things right to the best of my ability. I understand that this court will order me to pay restitution. I welcome that. I want to do my best to make amends with Gateway.”

“THE COURT: When you agreed with other s to commit, to be involved in this fraudulent scheme, did you do so knowingly and intentionally? “THE DEFENDANT: Yes. “THE COURT: And you knew it was against the law to commit a fraudulent scheme like this, didn’t you? “THE DEFENDANT: Yes. [¶] . . . [¶] “THE COURT: All right. Ms. Metaxas, please stand. How do you now plead to Count One of the indictment 14

- 109, conspiracy to commit bank fraud, guilty or n ot guilty? “THE DEFENDANT: Guilty

. “THE COURT: Did you do what you are charged with doing in Count One, Ms. Metaxas? “THE DEFENDANT: I did. “THE COURT: Are you pleading guilty because you are guilty? “THE DEFENDANT: Yes. “THE COURT: Are you plead ing guilty voluntarily and of your own free will? “THE DEFENDANT: Yes. ” As the referee described, “Metaxas was sentenced on December 2, 2015. She served her 18

- month sentence, but currently is challenging her conviction, alleging that she received erro neous legal advice from her counsel, which advice caused her to enter a guilty plea. ”18

Following his exhaustive recitati on of facts , and a discussion of the parties’ contentions, the referee’s statement of decision turned to his analysis of liability , beginning with that for the w orking capital loan . After a brief description of the issue, t he referee described the essence of it: “The crucial legal questions regarding Metaxas’s liability for the March 26 transactions are: (1) did she know the ‘actual deal’ when she presented those matters to the Board; (2) if so, did she intentionally not reveal that knowledge ; if so, (3) did she intend to deceive her Board into thinking these were legitimate and unrelated transactions that the Board ought to approve; if so, (4) did the Board reasonably rely on her represen tations and omissions when approving these two transactions, and, finally, if so , (5) was the Bank damaged as a result of entering into those transactions. ” And, the referee said, he “is satisfied that the answer to all of these questions is ‘yes.’ ”
The referee then spen t over four pages explaining in detail the reasons for his “yes ” response , conclud ing as follows: “The Bank clearly changed its position (i.e., it entered into the March 26 transactions) in reasonable reliance on Metaxas’s representation s and omissions, and did so to its
detriment.

. . . As such, the Bank has prove n , by a preponderance of the evidence, all the essential elements of the First Cause of Action (fraud) , Second Cause of Action (fraudulent omission/non

- disclosure), and the Fou rth Cause of Action (intentional breach of fiduciary duty) with regard to the March 26 transactions. Given this finding that Metaxas’s actions were intentional, the question of whether she might have been negligent in those

matters (as alleged in the Sixt h Cause of Action) is moot.” The referee then turned to Metaxas’s liability for the $757,000 wire transfer

. A nd following a four

- paragraph analysis , he concluded Metaxas

was liable because she breached her fiduciary d u ty.19

The referee then discussed for some eight pages the issue of damages, at the conclusion of which he awarded Gateway damages totaling $ 3 82,154 , $250,000 of which was tort of another damages

. 9 As he described, Gateway “clearly was damaged by the ‘fallout’ from being induce d to enter into the
March 26 transactions , ” going on to decide that “ some portion ” of the almost $1,500,000 in attorney fees defending the criminal investigation s was appropriate, concluding as follows: “Metaxas’s tortious conduct on March 26th clearly ca used the bank to hire counsel to defend itself, and its B oard members, in the Grand Jury investigations. The undersigned’s best approximation of the amount of fees reasonably incurred by the Kilpatrick & Townsend firm for work related to the events of Mar ch 26, 2009, is $250,000.00, and that amount is awarded. ” The referee also awarded

9 The tort of another doctrine, sometimes called the third

- party tort doctrine, provides that a party may be awarded attorney fees in a situation where one person commits a wrongful act that he or she can reasonably foresee would cause another to have to de fend or prosecute a lawsuit involving a third party. As the Supreme Court has described it: “A person who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover compensation for the reasonably necessary loss of time, attorney’s fees, and other expenditures thereby suffered or incurred.” ( Prentice v. North American Title Guaranty Corp. (1963) 59 Cal.2d 618, 620.) The doctrine is not an excepti on to the rule that parties bear their own attorney fees, “but an application of the usual measure of tort damages. The theory of recovery is that the attorney fees are recoverable as damages resulting from a tort in the same way that medical fees would b e part of the damages in a personal injury action. In such cases there is no recovery of attorney fees qua attorney fees. . . . [¶] [N]early all of the cases which have applied the doctrine involve a clear violation of a traditional tort duty between th e tortfeasor who is required to pay the attorney fees and the person seeking compensation for those fees.” ( Sooy v. Peter (1990) 220 Cal.App.3d 1305, 1310.)20

Gateway $132,154 for the breach of fiduciary duty in connection with the wire transfer

. Following all that, the referee turned to Metaxas’s claim of “special benefit , ” rejecting it with this analysis : “As for Metaxas’s argument that the above damages (both for the March 26 transactions and the November 27 transfer) should be offset by the ‘ special benefit ’ her tortious conduct conferred on the Ban k (by way of the amounts it realized when all three asset purchasers as well as Ideal defaulted on their loans), the cases make it clear that this offset is an equitable process, to be applied in the discretion of the fact finder: ‘.

. . consideration may be given, where equitable , to the value of any special benefi t conferred by that act . . . .’ ( Maben v. Rankin (1961 )
55 Cal.2d 139, 144 (italics added) ) ; ‘. . . the value of the benefit conferred is considered in mitigation of damages, to the extent tha t this is equitable. ’ ( Turpin v. Sortini ( 1982) 31 Cal.3d 220, 236 (italics added).) Metaxas’s conduct overall in these matters, including the harm to the Bank ’s overall business reputation, dictates against the exercise of equitable discretion in her fav or.”
The Motion to Vacate
The amended statement of decision was filed on July 26, and judgment
entered that same day. On August 13, Metaxas filed a motion to v acate j udgment, argu ing that the referee had no authority to exercise equitable discretion in his application of the s pecial b enefit d octrine. The Bank filed opposition, Metaxas a reply, and the motion came on for hearing on October
11. On October 14, the referee filed his ord er denying the motion in two thoughtful paragraphs. The first paragraph distilled the law

. T he second
said this :21

“2. The Equities in This Case Did not Favor Defendant Metaxas : Because her only argument on this motion was that application of the Special Benefit Doctrine could not include equitable considerations, she did not
address whether the undersigned was wrong in the equity determination he made. However, even if she had challenged the equity determination, the undersigned stands by his earlier co nclusions as to where the equities lay. Defendant Metaxas’s intentional tortious conduct caused the Bank years of unnecessary legal battles with federal regulators and federal criminal prosecutors, not to mention the reputational harm that obviously flowe d from having its former President and CEO charged with bank fraud. Even if the phony round

- trip transactions she induced resulted in some financial gain to
the Bank , that gain was clearly outweighed by the years of troubles her
actions caused the Bank , f inancial and otherwise.” On October 29, Metaxas appealed

. DISCUSSION The Referee’s Award of $ 250,000 Tort of Another Damages is Supported by the Record As noted, Metaxas makes two arguments on appeal, the first of which is that “because Gateway profited overall from the r ound t rip t ransaction, the trial court erred in awarding Gateway compensatory damages for that transaction.” Metaxas contends Gateway b enefited pecuniarily from the transaction, and thus under the “special benefit” doctrine , the referee could not award any damages

. O r , to put it in the words of Metaxas’s sub

argument, the referee “ lacked discretion to award compensatory damages
without t aking into account the profits Gateway earned from the r ound t rip

t ransaction.” Metaxas is wrong for several reasons, beginning with the law of special benefit.22

The s pecial b enefit d octrine is based on section 920 of the Restatement Second of Torts (sect ion 920)

. Section 920 is entitled “ Benefit to Plaintiff Resulting F rom Defendant’s Tort , ” and provides in its entirety as follows: “When the defendant’s tortious conduct has caused harm to the plaintiff or his property, and in so doing has conferred a special benefit to the interest of the plaintiff that was harmed, the value of the benefit conferred is considered in mitigation of dam a ges, to the extent that this is equit able.” Metaxas argu es that the referee had “no discretion to disregard Gateway’s profits

. ” In the words of Metaxas’s brief , the reference to

“ equit able” in section 920 “merely provides courts with flexibility in the unusual case where deducting benefits d oes not place the injured person in the position they would have occupied absent the tort. (Rest.2d Torts, §920, com. f .) That exceptional circumstance occurs when the tort causes a ‘benefit’ the injured party never wanted: “f. Equitable considerations. The rule stated in this section is limited by the general principle underlying the assessment of damages in tort cases , which is that an injured person is entitled to be placed as nearly as possible in the position he would have occupied had it not been for the plaintiff’s tort

. This principle is intended primarily to restrict the injured person’s recovery to the harm that he actually incurred and not to permit the tortfeasor to force a benefit on him against his will .”
In other words , Metaxas reads com ment f

. to mean that a court may
exercise its equitable discretion only in the “exceptional circumstance” where a “non

- cash benefit” is foisted upon an unwilling plaintiff , when the tort caused a “benefit” the injured party never wanted

. A nd , Metaxas asserts,23

where “cash out flows and inflows” are concerned , “both the law and equity require the deduction of benefits.” 10 To begin with, Gateway did not ask for any purported “ benefit. ” As the referee found, the evidence showed that the Board would not have approved
either the toxic asset sale or the working capital loan if Metaxas had disclosed the true facts. So , any benefit Gateway obt ained as a result of Metaxas’s fraud were obtained against the Board ’s will, a “benefit” the b ank
never wanted

. Thus, even under Metaxas’s own view of the law , she would
not be entitled to an off set

. In any event, Metaxas cites no case supporting her cont ention

. A nd her argument ignores the last seven words of section 920, essentially argu ing that the plain language of section 920 does not mean what it says. While comment f

. endorse s the basic tort prin ciple that meritorious plaintiffs should be placed in the position they would have occupied had it not been for defendant’s wrongdoing, it does not compel a court to disregard equitable considerations when assessing damages. To the contrary, any decision to mitigate damages is only “to the extent that it is equitable.”

10 We are constrained to note that Metaxas’s citation to comment f

. is less than candid, as it omi ts the language that follows her quotation, which is this: “Thus, when a person has land or chattels that he has devoted to a particular purpose, he is entitled to continue to use them for that purpose, and the person who interferes with the use is not en titled to have damages mitigated by the fact that he has added to their market value. In these cases the good faith, and reasonableness of the attitudes, of the parties are factors in determining the measure of recovery. Thus unless the plaintiff is capr icious or spiteful and the defendant has acted by mistake, so that his conduct was not knowingly tortious

. . . , the damages may not be diminished by the fact that the defendant’s interference has increased the monetary value of the property. On the cont rary, if the owner has acted reasonably in restoring the property to its original condition, he may recover the cost of doing so.”24

The referee noted this has been the rule in California since at least
1961. As indeed it has, as expressly set forth in the cases that discuss the

s pecial b enefit d octrine , including cases cited by Metaxas. The following are
illust r ative:
Mab e n v. Rankin (1961) 55 Cal.2d 139, 14 4 : “ [ C ] onsideration may be given, where equitable, to the value of any special benefit conferred by that act to the interest which was harmed.” Turpin v. Sortini (1 982) 31 Cal.3d 220, 236: “ ‘ the value of the benefit conferred is considered in mitigation of damages, to the extent that this is equitable

. ’ ”
Heckert v. MacDonald (1989) 208 Cal.App.3d 832, 839 : “ ‘ the value of the benefit conferred is considered in mitigation of damages, to the extent
that this is equitable. ’ ”
Heckert v. MacDonald , supra , 208 Cal.App.3d 832, a decision of this

court , is instructive. There, the buyer of an apartment building sued t he
sellers and the ir broker for structural defects the broker failed to disclose; the
sellers cross

- complained against the broker for their attorney fees. The trial court held that the sellers were entitled to recover their attorney fees under the tort of another doctrine, but that the fees should be mitigated because the sellers benefited from the broker’s conduct by realizing an inflated profit from
the sale. We affirmed, expressly noting the “incestuous relationship”
between the sellers and their broke r , thus conclud ing the lower court’s decision was “ equitable in the circumstances of this case

. ” ( Id. at p. 840 , italics added.) So, far from requiring an automatic deduction where “cash profits” are concerned, as Metaxas contends, Heckert reinforces the rule that the value of the benefit conferred is considered in mitigation of damages “to the extent that this is equitable.”25

In short, the rule is 180 degrees from that of what Metaxas asserts : the equitable nature of the special benefit doctrine means th at the value of the benefit may be considered. Or, a s Witkin succinctly s t ates it , mitigation under the special benefit doctrine is “sometimes” appropriate: “If the defendant’s tort causes injury to the plaintiff, but also confers a special benefit on the plaintiff, the value of the benefit may sometimes be considered and the plaintiff’s recovery limited to the net loss. ( Maben v. Rankin (1961) 55 Cal.2d 139, 144 [‘In determining the damages suffered as a result of a tortious act, considerat ion may be given, where equitable, to the value of any special benefit conferred by that act to the interest which was harmed ’]; Rest.2d, Torts § 920; see Dakota Gardens Apartment Investors “B” v. Pudwill (1977) 75 Cal.App.3d 346, 352, 354, citing the text [defendant cannot diminish amount of damages by paying debt of plaintiff without plaintiff’s consent; mitigation will be denied where it is inequitable]; 22 Am.Jur. 2d (2013 ed.) . [Citations.] )” ( 6 Witkin , Summary of Cal. Law ( 11 ed. 20 21 ) Torts, §1803 .) “Mitigation of damages in tort cases is restricted by principles of equity. ” ( Dakota Gardens Apartment Investors “B” v. Pudwill , supra , 75 Cal.App.3d at p. 352.) In light of the equitable nature of the analysis, the observation by our colleagues in Division Four is apt, this i n Richardson v. Franc (2015)
233 Cal.App.4th 744, 751: “After the trial court has exercised its equitable powers, the appellate court reviews the judgment under the abuse of discretion standard. [Citation.] ‘ Und er that standard, we resolve all evidentiary conflicts in favor of the judgment and determine whether the trial court’s decision “ ‘falls within the permissible range of options set by the legal
criteria

. ’ ” ’ ” (Accord , Hirschfield v. Schwartz (2001) 91 Cal.App.4th 749, 771.) And to demonstrate such abuse , Metaxas must show that the referee’s26

decision “ ‘ is so irrational or arbitrary that no reasonable person could agree
with it. ’ ” ( Sargon Enterprises, Inc. v. University of Southern California (2012) 5 5 Cal.4th 747, 773.) This , she has not done. As quoted above, the referee held in the statement of decision that

“ Metaxas’s conduct overall in these matters, including the harm to the b ank ’s overall business reputation, dictates against the exercise of eq uitable discretion in her favor.” A nd as the referee later put it in his order denying

t he motion to vacate, Metaxas’s “ intentional tortious conduct caused the b ank years of unnecessary legal battles with federal regulators and federal criminal prosecutors, not to mention the reputational harm that obviously flowed from having its former President and CEO charged with bank fraud. Even if the phony round

- trip transac tions she induced resulted in some financial gain to the b ank , that gain was clearly outweighed by the years of
troubles her actions caused the b ank , financial and otherwise.” The referee’s
conclusions are fully supported. They are equitable

. A nd they a re correct. We note that Metaxas makes no attempt to show that the equities favored her, thus running afoul of the most fundamental principle of appellate revie w : “ ‘ A judgment or order of the lower court is presumed correct. All intendments and presumpt ions are indulged to support it on matters as to which the record is silent, and error must be affirmatively
shown. ’ ” ( Denham v. Superior Court (1970) 2 Cal.3d 557, 564.)
Were th at principle not dispositive, Metaxas’s argument fails because it
has no mer it. Metaxas’s entire argument is that the referee’s reasons for ruling for Gateway were “unreasonable , ” assert edly on two grounds: (1) it

was unreasonable for the referee to rely on the nature of her “intentional tortious conduct,” which “is relevant onl y in the punitive damages context ,” and (2) it was unreasonable for the referee to rely on the harm she caused,27

because the referee “unreasonabl y double

- counted some harm and relied on other harm that was unproven.” To begin with, Metaxas cites nothing in support of her claim that her “intentional tortious misconduct” is “relevant only in the punitive damages context.” 11 But beyond that, the ref eree could properly rely on Metaxas’s
conduct

— more accurately , misconduct

— to exercise his equitable discretion against her. Metaxas’s “intentionally tortious misconduct” with held the true information from the B oard, to deceive the B oard into thinking the

t ransactions were such that the B oard ought to approve them

— a fact, not incidentally, she expressly admitted when she entered her guilty plea.
Metaxas ’s “intentionally tortious conduct” included lying to the OTS about her knowledge and involvement in the f raudulent transactions. Indeed, Metaxas , who knew the OTS was investigating the legitimacy of the
March transactions , including the source of the down payments , point blank
told the investigators there were no connections among the purchasers and
she did not know the source of the down payment s

. Metaxas also obstructed the OTS’s investigation

. But not only did
Metaxas obstruct, she personally attack ed OTS examiner Lim and demand ed he be fired , causing more problems for Gateway

. Banking expert Kelley , who had personally dealt with regulators in this situation , testified that a CEO is the face of the bank to the regulators, and should foster an open and

11 Metaxas overstates the effect of the referee’s refusal to award punitive damages. That is, she asserts that the referee “reasoned that Metaxas’s conduct leading to the round trip transaction was not particularly egregious .” The referee made no such ruling . Rather, he declined to award puni tive damages because Metaxa s had already received and served an 18

- m onth prison term for her wrongful actions, and that “further punishment, by way of punitive damages, does not appear necessary at this juncture.”28

cooperative relationship with them. By excoriating Mr. Lim for investigating

t he very transactions Metaxas later admitted were fraudulent, she “almost openly declared war on the OTS ” ; it was a “death sentence” to the relationship. 12 As noted, the referee expressly concluded that Metaxas’s actions damaged Gateway’s reputation

. As it did . Again, expert Kelley’s testimony is apt: “[W]hen the federal government issues a press release and say s that your former president is accused of fraud and has been sentenced to a jail sentence, that has an impact on the bank’s reputation in the com munity. It

12 This was the relevant testimony from Kelley : “Q. How would writ ing a letter like that January 2010 letter that Ms. Metaxas sen t concerning . . . Lim affect the compliance costs that the bank would incur going forward? “A. Oh, I think it would immensely. I think at that point the OTS

— when you get to the stage where you absolutely feel that management is not being truthful or cooperative, you know, you take no

— you make no exceptions, you demand everything, you assume the bank is lying to you about everything they provide you. Again, it’s just a

— it’s complete lack of trust. “In my experience, when you have that lack of trust, the outcome is that you all of a sudden now have to have legions of attorneys and accountants that have to support the bank’s position, that have to defend the bank to the regulators, that have to be in place to respond to examination questions. It’s just a Pandora’s box that you open

. “Q. Have you dealt with regulators in that situation? “A. I have. I’ve dealt with

— again, been engaged by the FDIC to work with them in suing management and dir ectors of failed banks, and unquestionably, that management and directors often times, accuse them of bias or being unfair or not behaving appropriately. “What I’m telling you is that I haven’t seen certainly in my own career ever the need to send out this kind of letter. To me, it would have again been a death sentence on my relationship with the regulators.”29

has undoubtedly an impact on the bank’s marketing efforts, on its ability to hire and retain qualified officers, probably even has an impact on the amount of interest they have to pay for deposits that the bank raises. Those are significant.” 13 The referee’s equitable decision i s fully supported here.

13 Kelley’s testimony began with this hyperbolic description : “I think when you’re talking about reputational and franchise costs, they are signifi cant. They are harder to quantify, obviously, but, you know, when your CEO is led off in handcuffs, that has an impact on the bank’s perception within their community. ” This exchange then occurred: “[C OUNSEL FOR METAXAS ]: Objection, your Honor. That n ever happened. This is just fabricated testimony. “[T HE REFEREE ]: You want to clarify what you mean by ‘led off in handcuffs?’

“ [KELLEY]: Yeah. I was speaking figuratively. When you’re

— when the federal government issues a press release and says that your former president is accused of fraud and has been sentenced to a jail sentence, that has an impact on the bank’s reputation in the community. It has undoubtedly an impact on the bank’s marketing efforts, on its ability to hire and retain qualified o fficers, probably even has an impact on the amount of interest they have to pay for deposits that the bank raises. Those are significant.” Metaxas’s counsel moved to strike Kelley’s testimony

. T he referee den i ed t he motion , noting that, it’s “common sense” that the government’s accusations and Metaxas’s guilty plea would affect Gateway’s reputation: “I don’t see any harm in [Kelley] saying you can’t quantify it, but obviously those events hurt a bank’s image. It’s not roc ket science.” Now on appeal, Metaxas first describes Kelley’s testimony about harm to reputation as a “guess

. ” She then goes on to argue that Gateway “forfeited its right to be compensated for reputational harm by not pleading that type of injury,” that Kelley’s opinion had “no evidentiary value,” and that Gateway failed to prove “the extent of such damage.” As Gateway puts it, this is a “red herring.” The referee did not award any damages for reputational harm, and Metaxas’s counsel had every opportun ity to cross

- examine Kelley on his opinion.30

But even assuming Metaxas’s reading of the special benefit doctrine

w ere correct

— which it is not

— her argument would nevertheless fail for the fundamental reason that the evidence did not undisputedly show a special benefit. It is probably enough to quote from Metaxas’s own opening brief, which has a boldface heading that “Experts Disagree About Whether Gateway
Incurred Damages Due To The Round Trip Transaction.” Such

“ disagree[ment] ” must be interpreted in favor of the b ank

. As to Gateways “profits,” Metaxas asserts that the referee “found that Metaxas’s presentation to the Board ” caused Gateway to receive “$634,000 i n payments for the w orking capital loan and loans to facilitate.” The b ank ’s respondent’s brief takes issue with this , asserting that , “[w]hat the R eferee actually said is that Gateway ‘retained the asset buyers’ $3.8 million down payment ; retained (and r esold) the troubled assets themselves, retained the interest it received on all the loans, and received a $220,000 discount on certain of Ideal’s servicing rig h ts.’ [Citation.] While earlier in [ his ] decision
the R eferee noted that Metaxas claimed that Gateway received interest payments totaling $469,000 on the Toxic Assets and $165,000 on the w orking capital loan [citation] , the statement of decision does not include a factual finding about the specific amount of i nterest Gateway received and retained. Nor did Metaxas request a finding on that issue. ” Confronted with this, Metaxas’s reply brief says that the referee “implicitly found that Gateway received a cash benefit from the r ound t rip

t ransaction that was lar ger than the $250,000 tort of another damages award.” And Metaxas goes on for the next several pages to attempt to support the referee’s “implicit” finding.31

Metaxas cites nothing to support that one can imply a finding against a statement of decision

. To the contrary, a s we ourselves have put it, “ ‘Where [a] statement of decision sets forth the factual and legal basis for the decision, any conflict in the evidence or reasonable inferences to be drawn from the [evidence] will be resolved in support of t he . . . trial court decision.’ ” ( In re Marriage of Davenport ( 2011) 194 Cal.App.4th 1507, 1531, quoting In re Marriage of Hoffmeister (1987) 191 Cal.App.3d 351, 358.) “In support of” the
decision. Not “against” it. At oral argument, counsel for Metaxa s referred to one sentence in the referee’s 32

- page statement of decision , a sentence that reads, “treating the March 26th transactions as a whole, it is clear the bank was not damaged financially by the defendant overall.” Being “not damaged” is not sayi ng that Gateway “profited.” Indeed , in discussing the March 26 transactions, the referee found that under what he called the “actual deal”

— as contrasted to what he called the “Metaxas version”

— “the bank’s financial condition was not improved.” Another, and independent, basis why Metaxas’s argument fails is that it is based on another false premise

— that Gateway’s only damages were monetary. As Metaxas puts it at one point, “But when a plaintiff’s losses and benefits are merely cash outflows and inflows

— as here

— both the law and equity require the deduction of benefits. Because cash is fungible , the most accurate way to reverse the impact of the tort is to credit the plaintiff for their losses and debit them f o r their gains. (See In re De Lavega’ s Estate [ ( 1958 ) ] 50 Cal.2d [480] at pp. 488

– 489

. ) ” As quoted above , and as the referee found , Gateway was damaged in ways that went beyond “ cash , ” including, for example, suffering harm to its32

reputation and “the years of troubles [Metaxas’s] actions cau sed the bank, financial and otherwise.” The Referee’s Finding That Metaxas Breached Her Fiduciary Duty T o Gateway by Directing the $757,000 Wire Transfer is Supported by the Record The second issue before the referee was Metaxas’s liability for the November 2009 wire transfer . The referee found Metaxas liable based on breach of fiduciary duty, with this four

- paragraph analysis : “The timing of the events surrounding Metaxas’s approval of payment for a group of Ideal mortgages on November 25, 2009, is highly suspicious; Metaxas describes the timing simply as ‘unfortunate.’ [Citation.] The federal government had just filed a lawsuit seeking to enjoin all of Ideal’s FHA lending because of fraudulent loan practices. As a result of that lawsuit,
Metaxas had immediately issued an order within Gateway, stopping all transactions with Ideal. Yet, on Wednesday, November 25, 2009, Metaxas, over the objection of her own CFO, approved the payment for Ideal mortgages, and then on Friday the 27th specifically ord ered the transfer of $757,000 to Ideal as part of that purchase. The next working day (Monday, November 30) the authorities shut Ideal down. “At the time of the order to transfer the $757,000, Metaxas obviously knew of Ideal’s dire financial situation res ulting from the federal lawsuit. She may also have learned from Ideal, or from other contacts in the banking industry, that a shut

- down order was imminent. “Her November 27 transfer appears to have been more of a return favor
to Ideal than a sound busines s decision . And, this purchase clearly worked to Gateway’s detriment, as some of the loans indeed were bogus, causing Gateway to lose money o n this purchase.33

“There is little doubt that this rushed transfer, under the circumstances present at that time, w as a breach of Metaxas’s fiduciary duties. As such, the allegations of the Fourth Cause of Action (intentional breach of fiduciary duty) have been established regarding this November 25 to 27, 2009 payment to purchase Ideal loans. Her argument that the B ank was legally obligated to transfer the money to Ideal on November 27 is rejected.” Asserting , however inappropriately, things such as her “personal role in the wire transfer was not suspicious,” and the “timing of the wire transfer is not suspect , ” Met axas contends the referee erred in finding her liable

. Her argument is that “she had to let Ideal withdraw its own money and the wire transfer caused no additional dama ge s” ; o r, as a sub

- argument puts it, “Metaxas had no legal option but to approve Ideal’ s wire transfer request because the requested f unds were Ideal’s free and clear.” As noted, the referee “rejected” the argument

. So , Metaxas ha s to demonstrate error. She has not. Metaxas knew by October 2009 that the federal government had sued Ideal f or mortgage fraud and was trying to shut it down. In response, on October 2 0 , Metaxas directed her staff to stop all funding requests from Ideal
and place a hold on all its checking and any other accounts , testifying at trial that her instructions were to decline all funding requests until there was “proof” that the government’s suit against Ideal was “resolved satisfactorily

. ”
D espite that, Metaxas approved the wire transfer on the last business day before Ideal was shut dow n by the federal government , expressly

— and angrily

— overruling CFO Green in doing so. Metaxas argues that she did what she did based on the advice of outside corporate counsel, Barry Hovis . B ut her testimony on this point was34

hardly consistent, and on cros s
- examination she hedged as to whether Mr. Hovis actually gave her that specific advice . This was the exchange : “Q. Ms. Metax as, you testified yesterday that sometime between October 21, 2009 and November 27, 2009, you were advised by attorney Barry Hovis to release the hold on Ideal Mortgage’s accounts except to the extent of $757,000? “A. Sir, attorney’s advice was obtained by the Bank in reference to the handling of the total Ideal matter, many different things, some of which were referred to in Mr. Green’s memo. That information was then taken to the
Board that had a Sunday meeting, as you recall, that provided directions to management as to what was appropriate action there. [¶] . . . [¶] “Q. Exhibit 52 is your email dated October 20, 2009 to the bank’s senior management, its directors, and Mr. Hovis, correct? . . . This is directed to the people indicated on the email, correct? [¶] . . . [¶] “A. That is correct. That is fair. “Q. That includes all the Bank ’s senior management a t the time? “A. Correct. “Q. And Mr. Hovis? “A. Correct. . .

. [¶] . . . [¶] “Q. And the day before the OTS meeting , he received Exhibit 52, correct? “A. Correct. [¶] . . . [¶] “Q. And your testimony is that Mr. Hovis advised you to modify that direction sometime in between October 20 and November 27 when you sent the wire. Isn’t that right? “A. The recommendation Mr. Hovis made to the Board is

— was to be careful in cutting off all fundings, as I had proposed in here , sir. [¶] . . . [¶]35

“Q. And he advised you to reduce the amount of the hold to $757,000? “A. He did not say that, sir. “Q. He didn’t say that you needed to honor any funding requests, did he? “A. Mr. Hovis directed

— advised is a better word, that unless the Bank has legal reason to really hold onto all of Ideal’s money, the Bank should not
do so. “Q. And he put that advice in writing to you? He sent you an email that says that? “A. Okay. No. He did not put it in writing, sir.” Moreover, when Metaxas overrul ed CFO Green and directed the wire transfer herself

, she did not tell him that Mr. Hovis had instructed Gateway to honor Ideal’s funding request

. Not only that, when Green was questioned about the intensity of Metaxas’s position, and what reasons she offe red to justify her decision, he testified that she talked of “customer loyalty” and “platitudes.”
A lso suspicious i s that Metaxas’s action was contrary to her position at trial , where she testified it was not her job to be involved in the day

- to

- day operations of the b ank

. Despite that , Metaxas took it upon herself to take the “very rare” step to personally direct the $757,000 wire transfer. 14 Nor did
Metaxas explain why Gateway had to make the pay ment that very day , the

14 Banking expert Kelley described th e highly unusual nature of Metaxas’s actions this way: “I don’t believe in 12 years as president of a community bank that I ever authorized a wire or signed a wire. It is no t my function remotely, and I certainly wouldn’t have dreamed of doing so over the objections of my CFO. I mean, that is the person within the bank that is really tasked with maintaining financial integrity within the bank in terms of the systems and prac tices of the bank. So yea h , for her to do that, to me, would be very rare in my experience.”36

rushed timing of which, the referee noted, was “highly suspicious , ” coming as it did on the eve of Ideal’s collapse. The referee could , a s he did , reasonably infer that the transfer was more of a “return favor to Ideal than a sound
business decision. ” The referee could , as he did, “reject” Metaxas’s argument
that “the Bank was legally obligated to transfer the money to Ideal.”
Metaxas has shown no error. DISPOSITION The judgment is affirmed. Gateway shall recover its costs on appeal.37 _________________________ Richman, Acting P. J.

We concur:

_________________________ Stewart, J.

_________________________ Miller, J.

Gateway Bank, F.S.B. v. Metaxas ( A 158793 )38

Trial Court: San Mateo County Superior Court
Trial Judge: Honorable Robert Baines
Attorney for Plaintiff and Respondent, Gateway Bank, F.S.B. : Kirschenbaum Law, PC, Jeffrey B. Kirschenbaum, Raymond E. Loughrey, Kristin L. Williams
Attorney for Defendant and Appellant, Poppi Metaxas : Katz Appellate Law, Paul J. Katz

.